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In my opinion, the U.S. Dollar continues to bounce within an overall range between 78.61 and 75.23 with what I see as a definite bearish bias coming from the mark down phase which has yet to transition or be broken. The daily chart’s direction is still clearly down despite recent bounces to the upside which continue to find selling pressure between the 20 period simple moving average and the 34 period exponential moving average on the low.

To me, this is the zone that sellers are overpowering bullish momentum at and within the context of the current downtrend, this is also an area where the dollar would be expected to move back lower from. The challenge with the bearish outlook however, comes from the fact that the daily time frame is behaving like a distribution range – despite lower lows.

I believe distribution presents a problem for both clarity of direction and market organization. A full transition into distribution could mean that momentum has become unorganized and the bearish market sentiment has faded, but I do not automatically assume this means that the bulls have won the battle. To me, the prevailing trend and the recent market memory is bearish. Strength would be perceived as prices maintaining support above 78.50.

Distribution is characterized by the directionless volatility seen over the past three weeks as the dollar congests near the lows. I believe this unorganized momentum is the first sign of what may be a range that will continue to test the resolve of longer term trend traders in this environment – of which I am one.

Today’s dollar price action has attracted buyers above the 77.00 level which has in turn put pressure on the EUR/USD which had been bouncing off the support of the 34EMA Wave on the daily time frame.

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